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A market of opportunity for the taking

A market of opportunity for the taking

By Sean Duffy, Managing Director and Head of Technology, Media and Telecoms at Barclays 

Recently the Confederation of British Industry (CBI) revealed that activity in the business and professional services sector, which includes the marketing industry, has grown to its highest levels since 2007. This growth is great news for the sector and the UK economy as a whole, but the outlook is still mixed for many marketing firms.

It will come as no surprise that the companies that are most willing to invest in marketing are the big name international brands. The IPA Bellwether Report 2013 found that almost a quarter of the UK’s top businesses increased their marketing spend in Q2 of this year.

For marketing agencies that work with this type of client, the outlook looks positive. However, one of the biggest challenges facing agencies of all sizes and across all sectors is that many companies – including the big household names – are now consolidating their marketing retainers into fewer agencies. Though multiple agencies for different marketing channels and disciplines used to be the norm, brands now want an internationally recognised agency that can deliver a strong integrated offering.

According to the same report, online marketing spend was particularly strong in the second quarter and drove the overall increase in budgets. Digital is now a core channel and agencies need to ensure they can deliver on this, as well as more traditional aspects of a campaign, in order to win these big clients and retainers.  A case in point is media giant WPP, which has grown to be one of the world’s biggest marketing communication agencies through multiple takeovers and acquisitions, consolidating a range of different offerings that include advertising, PR, marketing and digital.

That’s not to say the future is gloomy for more specialised agencies or those working with smaller brands. These agencies can instead position themselves as a go-to agency for a niche sector of the market. This can offer significant opportunities in terms of exposure and experience, enabling them to build an enviable client roster and establish a good reputation. By offering the right proposition, these smaller firms can potentially win valuable campaigns from their global counterparts. For example, Publicis and Omnicom have recently announced their merger, a bid that would see them become the world’s largest advertising agency.

In this situation, the reformed business will require a period of transition whilst the brand establishes itself. During this transition, a smaller business may see the opportunity to try to entice some of its clients to a specialised agency. The challenge for smaller agencies is how to scale to meet the client’s demands if and when they win the whole business. Firms can choose to up-skill existing staff, work with specialised freelancers, or recruit new employees who can work in both offline and online environments.

But it’s not just about capabilities and skill sets, international support is becoming another key requirement for many businesses looking to work with one marketing partner for all activities around the world.  Agencies that can support brands internationally, as well as being able to deliver a stellar service on a domestic level are in a strong position. Droga5, a highly regarded independent US agency, has recently opened up its European offices. Its bold move to establish itself in this market has paid off and the agency has just won Heineken’s Stongbow apple cider account across Europe, fending off competition from UK agencies that have been established in the region for much longer.

It takes time to build a global network, but by starting with a foothold in key markets, particularly in the US and Asia, and using the skills and contacts of a trusted advisor,  these agencies will be well placed to increase their budgets from existing clients, as well as win new business from companies requiring international campaigns.

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